Europe's debt crisis must not be allowed to derail the global economic recovery, Barack Obama and his German counterpart Angela Merkel warned yesterday, stressing that they would work together to prevent the world from heading into a "double dip" recession.

The US President did not want to "panic" or "over-react". But he agreed to consult regularly with transatlantic allies regarding the best way to help Greece and other troubled eurozone nations. Their difficulties "cannot be allowed to put the global economic recovery at risk", he said.

His comments came on the second day of a three-day official visit by the German Chancellor, characterised by pomp and public displays of warmth which may lead the UK to wonder if it is in danger of being supplanted as the recipient of what diplomats refer to as the "special relationship".

On Monday night, Mrs Merkel was treated to a cosy dinner by Mr Obama at 1789, one of Georgetown's fanciest restaurants. Yesterday began with marching bands and a 19-gun salute on the south lawn of the White House. Only the fact that Mrs Merkel is not officially a head of state prevented 21 guns from being fired.

At an outdoor lectern, next to a voluminous red carpet Mr Obama then joined JFK on a long and prestigious list of US leaders to have mangled the German tongue when he welcomed his guest. The display of pageantry was followed by lengthy talks touching on trade, the Middle East peace process, Libya and Germany's involvement in Afghanistan, but focusing on joint steps to shore up shaky economic confidence.

"Germany, at the heart of Europe, is one of our strongest allies," Mr Obama said. Last night saw a State dinner at which the Chancellor was presented with America's highest civilian honour, the Presidential Medal of Freedom. Germany thus became the first European nation to be granted a State dinner since Mr Obama moved into the White House; just three other nations, India, China and Mexico, have previously received such a public recognition.

The British Prime Minister, David Cameron, is still awaiting his invitation. During the President's recent visit to the UK, he had to make do with a joint photocall in which they rolled up their shirt sleeves and played ping pong.

Diplomatic gossips meanwhile made much of the informal chumminess displayed by the Chancellor and the President at their official joint press conference shortly before lunch yesterday. Mrs Merkel described Mr Obama as "dear Barack" and talked at length of the shared values of the two nations, noting that about one in five Americans boasts German ancestry. "We are standing on a firm foundation, and standing and supported by this firm foundation we tackle the current challenges we both face," she said.

With a nod to her East German upbringing, Mrs Merkel noted that "when Germany and Europe were divided by the (Cold) war and barbed wire, America consistently stood on the side of freedom".

The united front may have been part of a public effort to dispel rumours that Mrs Merkel and Mr Obama lack chemistry. The German newspaper Der Spiegel once described them as "transatlantic frenemies", and the duo have recently clashed over Libya, thanks to Germany's refusal to join the Nato operation against the Gaddafi regime.